New orders boost KSA non-oil sector growth

Cranes unload containers in Jeddah Islamic Port. Business optimism in future output has risen markedly. (AFP)
Updated 06 November 2018
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New orders boost KSA non-oil sector growth

  • The measure of non-oil business conditions — the Emirates NBD/IHS Market Purchasing Managers Index (PMI) — rose slightly to 53.8 in October from 53.4 in September
  • A breakdown of the numbers shows that new export orders recovered in October after contracting in September, demonstrating improved external demand for Saudi non-oil goods and services

LONDON: Growth in Saudi Arabia’s private non-oil sector edged upwards in October, driven by an increase in employment and new orders, according to a survey.
The improvement suggests that any fallout from the murder of Saudi journalist Jamal Khashoggi in Istanbul last month, including the threat of sanctions by the US, has not yet dented business sentiment in the Kingdom, according to analysts.
“After all sanctions were never likely to go beyond low level asset freezes and travel bans anyway, and in any case the US has scaled down its rhetoric in recent weeks,” said Gabriella Dickens, assistant economist at Capital Economics in a research note on Nov. 5.
“Sentiment might have been supported by the announcement that public sector bonuses will be fully reinstated,” she said.
The measure of non-oil business conditions — the Emirates NBD/IHS Market Purchasing Managers Index (PMI) — rose slightly to 53.8 in October from 53.4 in September. The measure remains below the year-to-date high of 55.1 recorded in August.
Any reading below 50 indicates a contraction while anything above signifies growth.

 

A breakdown of the numbers shows that new export orders recovered in October after contracting in September, demonstrating improved external demand for Saudi non-oil goods and services, according to a note by Khatija Haque, head of MENA research at Emirates NBD.
The measure of output rose at the slowest rate since April, which suggests that the increase in orders has not yet generated growth in actual output, the note said.
The employment index rose to 51.3 in October from 50.7 in the previous month, the highest measure recorded since March.
October also saw business optimism about future output rise “markedly” with almost 50 percent of companies surveyed saying they expected their output to be higher in a year’s time, the survey found. The other half said current levels of output would likely be sustained.
This improved business sentiment could be partially put down to the price of Brent oil exceeding $80 per barrel, according to Haque.
While non-oil sector growth in the Kingdom remains slower so far this year compared to 2017, the impact will be offset by the renewed oil sector growth, said Haque.
Emirates NBD has retained its forecast of 2 percent GDP growth for 2018.
Neighboring UAE saw its PMI measure for October fall to 55.0 from 55.3 in September.
“Although this is a disappointing result, it is important to note that the headline figure remained above its long-run average,” said Dickens in a note.
Business confidence for future output rose to a record high, with close to 78 percent of those surveyed saying their output would be higher in a year’s time.
Higher oil prices coupled with an anticipated increase in government spending as the country prepares for the World Expo 2020 helped fuel the increasing optimism.
Egypt’s PMI remained below 50 which indicates a contraction in growth — slipping to 48.6 in October from 48.7 the previous month. This is the lowest reading for the year so far.
“The data suggests that private sector firms remain under pressure as Egypt’s IMF-sponsored economic reform program continues,” according to Daniel Marc Richards, MENA economist at Emirates NBD.
“That being said, the reading is still far higher than those seen at the start of the process in November 2016, and future expectations remain robust,” his research note read.

FASTFACTS

New export orders in Saudi Arabia showed signs of rebounding in October after shrinking in September.


Germany bans Iranian airline on suspicion of spying, terror

Updated 26 min 24 sec ago
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Germany bans Iranian airline on suspicion of spying, terror

  • Several European Union countries accuse Iran of carrying out spying operations or planning attacks on the continent
  • The government suspects the airline, which has been on a US sanctions list since 2011, is used for military purposes by the IRGC

BERLIN: Berlin has revoked Iranian airline Mahan’s right to operate in Germany, a senior government source told Reuters on Monday, giving both safety concerns and the suspicion that the airline was being used for military purposes as reasons.
The government suspects the airline, which has been on a United States sanctions list since 2011, is used for military purposes by Iran’s Revolutionary Guards as well as for terrorist activities.
Several European Union countries accuse Iran of carrying out spying operations or planning attacks on the continent. The government source said that the flight did not constitute general sanctions against Iran.